As you can imagine, the government is spending an enormous amount to support people, businesses and the economy through the Coronavirus crisis. As you can also imagine, they are looking at ways to raise funds to cover the cost.
In July, Chancellor Rishi Sunak commissioned a report from the Office of Tax Simplification (OTS) which has just been published. The report suggests that one way to raise funds would be to raise Capital Gains Tax (CGT).
CGT is payable on the profits when you sell or otherwise dispose of certain assets, except when included in your Will – the latter is one of the exemptions that might change.
What changes are suggested?
Currently, CGT is set at 10% for people who pay basic rate tax, and 20% for those who pay higher rate. Current exemptions include:
- CGT can be wiped on inherited assets
- The first £12,300 of capital gains each year is free from CGT
- Investors are spared CGT when they keep shares in unlisted companies for 3 years or more
The report argues that the people who are likely to be affected by the proposed change are the wealthiest – while over 31m people pay income tax, only 265K pay CGT. It also suggests that the current system incentivises people to characterise income as a capital gain.
The suggestion is to double CGT to bring it into line with income tax rates, and reduce the exemptions. This change could generate as much as £14bn.
What this means to you
Given the potential changes, you might want to arrange a review of the implications with Kate Handel – she’s one of our specialists in Wills, Trusts and Tax planning, a member of the Society of Trusts and Estate Practitioners, a Trusts and Estates Practitioner, and a member of the Law Society Private Client section.
However, there’s no need to take urgent or specific action. A Treasury spokesperson has said: “The report will be considered in due course” and the Chancellor might decide against accepting the recommendations.